January 24, 2011

China's soy prices stable, buyers turn to domestic market

Soy prices in China's major producing areas were mostly unchanged in the week to Friday (Jan 21), while those of imported soy saw slight increases.

Soy prices Heilongjiang province, whose output accounts for 40% of the nations' total, were around RMB3,800 (US$577)/tonne, unchanged from a week earlier.

Imported soy prices at major ports rose about RMB50 (US$7.59)/tonne to about RMB4,250-4,300 (US$645-$653) in the week, encouraging buyers to purchase more local soy. Some crushers were forced to cancel shipments of US soy cargos due to poor margins, according to reports.

Some crushers have started to place fresh orders for domestic soy ahead of the Lunar New Year due to worries that prices may rise further on the back of high inflationary pressures, analysts said.

More farmers are changing their minds and starting to sell down stockpiles, deciding to raise cash for the holidays.

Tight rail capacity for soy shipments has hampered progress, however, as most of the capacity has been allocated to transporting half of China's 1.3 billion people home for the Lunar New Year, which will fall on February 3.

With about 6-7 million tonnes still in reserves, the government is releasing soy to ensure market supply and stabilise prices.

The Heilongjiang government has sold a combined 103,754 tonnes of soy at eight weekly auctions since it resumed sales last year. The central government has not sold any soy this year as the prices offered have been too high.

The central government will offer 300,000 tonnes of soy on January 25, its fifth such auction since last December.

Soy imports last year rose 29% to a record 54.8 million tonnes, according to the General Administration of Customs.